Hi,
So both of us live in MA as resident. My company is in MA, and wife got a remote job for a company in NY since June 15. How do we file tax return in this case?
Federal file jointly
MA state return file jointly
NY state return file separately for my wife alone?
Can turbo tax handle this situation?
File jointly doing federal first, non resident NY return second and resident return MA last. MA will give you credit for any NY tax liability.
No. You are filing all returns jointly. When completing the NY return you will be able to report what income was earned in NY.
She may not have to pay NY income tax, at all.
If you work outside NY as a job requirement, you are only subject to New York State income tax on the days you work in New York. But if you work outside New York for your own convenience, you are subject to New York State income tax on all your income. Pennsylvania, Nebraska, Delaware and Arkansas have the same rule. Here's a link to New York's memorandum on its "convenience of the employer" tax doctrine regarding non-resident telecommuters: https://www.tax.ny.gov/pdf/memos/income/m06_5i.pdf
But, if 100% of your work time is in MA (not even 1 day in NY), you may not be subject to any NY tax*.
But the bottom line may be whether your employer withholds NY state tax. If they do, you may have a hard time getting a refund from the NY Dept. of Taxation and Finance. Due to NY's higher tax rates, you are unlikely to get a full credit, on the MA return, for tax paid to NY.
The Hayes decision was in 1978. There were no telecommuters in 1978. Hayes was not telecommuting. Also, Hayes's situation was very unusual, and involved a written quid pro quo agreement with the employer. I would be very hesitant to try to apply a 44-year old court decision to a present-day situation with a very different set of facts, especially since the decision is not reflected in the 2006 Department of Taxation and Finance document TSB-M-06(5)I. There could have been subsequent legislation or legal action over the last 44 years that changes the rules. Before you rely on the Hayes decision you should get expert legal advice.
For those who might be interested, this 2021 web article has an excellent breakdown of New York's "convenience of the employer" doctrine regarding non-resident remote workers:
https://www.hodgsonruss.com/assets/htmldocuments/New%20Yorks%20Convenience%20Rule.pdf